Interview: CAC Group, persists in Brand building through integrated development

The long lasting impact by the economical crisis has inflicted the Chinese pesticide industry for the whole year. At the end of 2010, how the market has going on? How the solution the players have found in surviving in this downturn? Have they found any opportunity? What they expect the market in the year 2011? Agropages talked with Mr. Tianxiaohong, chairman of the CAC Group, about his reflections and explorations, as well as his understanding to the pesticide market.
 

CAC Group mainly engaged in synthesis and marketing of agrochemicals, fine chemicals and medicine intermediates, including herbicides, fungicides, insecticides, photoinitiators, water treatment agent. Since the foundation in 1992, CAC focuses on pesticide trading business and extends to upstream manufacturing business. After 18 years steadily development, CAC grows to a medium pesticide companies who has RMB1bio sales revenue with Chinese leading R&D, manufacturing, marketing and sales capabilities.
 

Cope with the crisis by initiative reform

Mr. Tianxiaohong says that as the continuous downturn of overseas pesticide demand and domestic deviant weather as well as the drawback abolishment of glyphosate, almost all pesticides stagnate at a low level in the 1st half year of 2010. Most companies faced serious challenges from either sales revenue or profit, but there are still several companies escape from the challenges and keep growing with quantity and profit as they adjusted product portfolio in time.

From early 2009, CAC Group  initiates to optimize business model and organize structure to defend the pesticide industry crisis. On the one hand, CAC keeps strengthening the manufacture capabilities of technical products to reduce the cost; on the other hand, CAC enlarged the investment on R&D and marketing of formulations as the higher margin from the finished formulations could compensate the competitive price advantage of technical products. In 1st half of 2010, CAC achieved RMB486mio sales revenue, increased 4% slightly compared with 2009; gross margin was about RMB71mio, decreased 30%. Of which, the formulations business increased 15% to 10,000KL.
 

Focus on outer and inner development

Mr. Tian also discussed about his opinion on opportunity for the consolidation. From a long term view, there is no world leading pesticide companies in China even though there are so much small companies with small scales. Industry merger or consolidation will be the trend of health development of Chinese pesticide industry. The continuous downturn provides the good opportunity for consolidation or merger. With the limitation of 22 high toxicity pesticides, phasing out of EC formulations, stricter environment protection regulations and the implementation of new pesticide management regulation, there are more challenges for small pesticide companies to survive.

To survive from the coming industry consolidation, the companies need to improve their core competitive advantages as well as vertical and horizontal integration with other capable companies. CAC is always seeking for strategy partners or industry consolidation opportunities to enlarge market share and improve our core competitive advantages.


Find the best suited way in seeking

He expressed CAC Group’s value brand building as well. During strengthening the capabilities of technical products toll manufacturing and OEM, CAC keeps exploring the marketing and sales of formulations in overseas market since 2002. Unfortunately CAC fails the attempt up to now, after comprehensive considerations, CAC decides to sell out all the business of Indonesia subsidiary company. In the future, CAC will focus on the tolling manufacture of both technicals and formulations for MNCs with high quality and competitive price. Nantong CAC will be the integrated technical plant with high QSHE standard and Suzhou CAC will be the formulation center in the future.

To avoid the risks of fierce competition in the future, CAC optimized its marketing & branding strategy. On the one hand, CAC will strengthen technical branding as a world leading technical products OEM or tolling manufacture plant, Nantong CAC will be built up as a world leading integrated plant with high QSHE standard; on the other hand, CAC will greatly develop the formulating and repackage business, Suzhou CAC will become Chinese leading formulation center with core competitive capabilities of formulating and repackaging.
 

Benefiting from the recovery

Mr. Tian has a positive expectation for the year 2011. To fulfill the vision of “growing as a world leading post patent pesticides and specialty chemicals manufacturer”, CAC formulated the following 4 strategies: 1. Build up a world leading integrated production plant with high QSHE standard; 2. Enlarge the investment for R&D on post patent agrochemical products; 3. Improve the marketing & sales capability of finished formulations in overseas downstream markets; 4. Develop specialty chemicals business based on the core technology and intermediates of core pesticides. CAS expects to achieve RMB1.6bio sales revenue and RMB250mio gross profit by end of 2013.

We strongly believe the pesticide industry will turn better in 2011 after further consumption of stock in the channel and warmer economy. Generally to say, both sales price and volume will increase compared to 2010. 2011 will be one of the most important years in Chinese pesticide industry development with industry consolidation, but we need to pay more attention to the influence of fast development of India pesticide industry and stricter regulations in China.